What Price Will YHOO Sell At?
After Yahoo! Inc. (NASDAQ:YHOO) released its second-quarter earnings on Monday, YHOO stock did—well, not much really. The market seems to be holding off on wild swings until CEO Marissa Mayer discloses the details of Yahoo’s auction.
Once its core assets are sold to the highest bidder, Yahoo will be nothing more than a standalone Japanese subsidiary and a stake in Alibaba Group Holding Ltd.
There was speculation that Mayer would reveal the details on Monday, but that didn’t happen. Tensions are running high following the auction’s close. Many hope it will finally give closure on what’s been a dark chapter in the company’s history. After all, Yahoo has technically been in decline for a decade. Though hope was kindled when Marissa Mayer initially took the helm, unfortunately, she couldn’t turn the ship around.
“We took a hard honest look at where we were and where we wanted to be, and took steps to get there,” Mayer said in a conference call with investors Monday. “This quarter has not been without its unique set of challenges.” (Source: “With no news on a sale, Yahoo stock stays static,” CNBC, July 18, 2016.)
So, now we’re left looking for scraps in what may be Yahoo’s last ever quarterly report.
Earnings per share fell slightly short of estimates at $0.09 compared to $0.16 per share in the same quarter last year. However, not all the news was bad. Revenue came in better than expected at $1.31 billion, up from $1.24 billion.
CEO Marissa Mayer attributed the revenue beat to “disciplined expense management,” which is laughable to anyone who knows the company’s history. She’s right that Yahoo is at a decade-low for headcount and expenses, but that’s not saying much.
The company has a long history of burning cash on useless acquisitions, redundant staff, and pointless luxuries. Mayer wasn’t proactive enough in stripping away the fat from YHOO stock, so some of the firm’s major investors forced her to sell the core assets.
Rumors have leaked during the auction process. We know there are bids from Verizon Communications Inc. and AT&T Inc. Both telecom companies would love to get their hands on some of Yahoo’s digital properties, not to mention the ad revenue they generate. There are also a few private equity firms interested in retooling the company.
Some observers have speculated that Mayer is dragging out the process because she is reluctant to sell. Odds are that she won’t have a job once the firm’s ownership changes hands.
Yet despite Mayer’s glowing reputation in Silicon Valley, not everyone would see her departure as a loss. After all, many of her biggest gambles failed miserably.
In 2013, Mayer spent $1.1 billion to buy Tumblr, a popular social media company. She had high hopes for the company, but it proved difficult to monetize. Even then it seemed like an odd buy. Now that Yahoo has taken a $712-million write-down on Tumblr, it looks like a downright disaster.
The pessimism from those kinds of blunders weighed heavily on YHOO stock, but now the market is eager for an end to this horrific saga. (Source: “Yahoo ‘screws it up,’ writes down $482 million of Tumblr,” CNN Money, July 18, 2016.)
There are rumors of bids as high as $6.0 billion for the company’s core assets. Considering that those rumors started before the end of the auction, last-minute bidding could have pushed the price even higher. In any case, I think this is the first time—in a long time—that we can reasonably be bullish on YHOO stock.